After a prolonged period of weakness, global crude oil prices appear to be on their way back up to level last seen in 2014.
Over the week, the commodity price breached the crucial level of US$82 per barrel due to the tightening of commodity market and the reluctance of the Organisation of the Petroleum Exporting Countries (Opec) leaders to immediately boost production.
In fact, some pundits believe oil prices could rise back to US$100 per barrel before the end of 2018.
A report by Bloomberg over the week noted that with the US sanctions on Iran taking full effect in early November, the US$100-oil scenario could become more realistic.
Quoting Mercuria co-founder Daniel Jaeggi, the newswire reported that Brent crude could rise to that level in the fourth quarter as the market did not have enough excess capacity to replace Iranian barrels. That bullish prediction was echoed by Trafigura co-head of oil trading Ben Luckock, who said Iran’s supply will be lower than most people had expected.
Adding to positive sentiment were forecasts for a decline in US stockpiles.
Nevertheless, Goldman Sachs Group Inc has poured cold water on oil forecasts of US$100 per barrel.
In a note, the global financial institution said another supply catalyst beyond Iran would likely be needed for prices to meaningfully break to the upside.
Goldman Sachs pointed out that production from other Opec producers and Russia could offset losses out of Iran, while any big jump in prices this fall ahead of the US mid-term elections would likely lead to President Donald Trump authorising a release from the country’s strategic reserves.
As a result, the bank, said Brent prices would likely stabilise at US$70 to US$80 per barrel by the end of 2018.
Separately, some analysts noted that the escalating trade tensions between China and the US could dampen global economic growth, and hence, put demand for energy at risk in the longer term, and offset the tightening of oil supply.
On that note, Petroliam Nasional Bhd (Petronas) president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin said that all oil and gas players should still “tread cautiously” despite the rising optimism in the market amid rising oil prices.
“As encouraging as it is, we can still expect volatility to continue given the prevailing external factors such as trade wars and other geopolitical risks,” Wan Zulkiflee said.
“While it is evident that players are now changing gears from survival to growth mode, I urge all players to tread carefully and respond cautiously to the unpredictable landscape,” he added.